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Indeed, according to the OECD it has identified harmful preferential regimes that fly in

the face of worldwide tax competition and gives an unequal edge in favor of the so called

tax havens and encourages abuse by its citizens. This argument lacks any credibility. The

United States admittedly has a preferential regime in the form of the Foreign Sales

Corporation that the World Trade Organization has already successfully attacked.

Switzerland has also admitted that the position with regard to its administrative and

service companies can be justifiably labeled as preferential regimes. Ireland has gone as

far as admitting that it has preferential regimes but according to its own statements only

to the international Financial Services Center, which arguably does the very same level of

offshore finance work as Cayman, Bermuda or The Bahamas, and the Shannon Airport

Zone.44

A further point, which has been highlighted, is the approach of the United States in

particular as regards to foreign earned income. A U.S citizen who has received income

from a bank deposit must pay federal income tax up to 39.6 percent on the income

earned. However, the position is different with non-resident aliens or foreign corporations

who pays zero U.S. income tax on U.S. bank deposit interest. The only exception is for

residents of Canada, with respect to other countries the amount of the interest that is

earned is not even reported to the Internal Revenue Service. Hence, obviously, it is not

being reported to other countries under United States tax treaties or tax information

exchange accords.

44 Ibid note 46..Langer also points out that the United Kingdom does not admit that it has any preferential regimes that may impugn the level of tax competition that it allows.

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